National bonanza sitting on shelf

By Misha Schubert and Barry Fitzgerald

AUSTRALIA may be sitting on an oil and gas bonanza after winning legal ownership of a slice of undersea territory five times the size of France.

In a landmark judgement by a United Nations commission, Australia expanded its borders by almost 35%, or 2.5 million square kilometres, including a seabed thought to harbour fossil fuels and minerals.

"I am pleased to announce that Australia, the largest island in the world, has just been dramatically increased in size," Resources Minister Martin Ferguson said yesterday.

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While limited exploration has occurred in the frontier territory, it could deliver a huge resources windfall. "This is potentially a bonanza," he said.

The Australian claim, which was lodged in 2004, is the first to succeed under the 1982 United Nations Convention of the Law of the Sea.

Under the treaty, nations can claim territory beyond the traditional 200 nautical-mile boundary if they prove the continental shelf reaches beyond it.

Such claims are normally capped at 350 nautical miles, except where the ocean is relatively shallow. Where the seabed is less than 2500 metres deep, a claim can extend for an extra 100 miles beyond the point where it dips below 2500 metres.

Despite the prospect of oil and gas reserves, motorists hoping for imminent price relief at the petrol pump were warned not to expect falls.

"LPG and oil prices are part of international outcomes … (like) the price of iron ore, uranium, coal, nickel and copper," Mr Ferguson said. "We are part of a world market."

But there was an imperative to find new deposits to secure a fuel supply for the nation.

"We do need to find another Bass Strait or alternatively develop alternative fuels, such as gas-to-liquids and coal liquids, because the issue of energy security goes squarely to the question of transport fuels."

The new territory includes two areas suspected of holding oil deposits — to the south of Lord Howe Island and in the middle of the Great Australian Bight — and one potential gas region off the Exmouth Plateau in Western Australia.

Geoscience Australia, which prepared the claim, said Australia had spent about $80 million over many years to gather evidence.

It said the extra territory increased Australia's 7 million-square-kilometre land mass by nearly 35%.

The oil and gas industry said the extension of Australia's seabed into "frontier" territory was exciting but cautioned it was early days when it came to potential discoveries.

The chief executive of the Australian Petroleum Production and Exploration Association, Belinda Robinson, said a "larger continental shelf means a larger canvas that we can paint our resource and energy future on.

"With more area comes more promise. However, we really know very little about the prospectivity of these areas and increasing that knowledge will be challenging, as will encouraging explorers into these areas, but, yes, it is very exciting," she said.

The industry is most excited about the extensions on the Wallaby and Exmouth plateaus and the Great Australian Bight — both off Western Australia — and the Lord Howe Rise off the eastern coast.

The additional seabed on the Wallaby and Exmouth plateaus covers a westerly extension of what has become Australia's major oil and gas province, the North-West Shelf. But the new area is in deeper water, making exploration and any future developments technically challenging and expensive.

The Great Australian Bight is considered Australia's best chance of finding a lot of oil.

The Lord Howe Rise is truly frontier territory.

No exploration has taken place in the region.

The Government's plan is to issue exploration permits in 2009-10.

Ms Robinson said one of the great advantages Australia had over other "mature" oil-producing regions was that less than a quarter of Australia's 50 hydrocarbon basins had been explored, presenting governments with an opportunity to attract explorers.

"Today's announcement leaves a lot of unexplored territory that may produce the next Australian oil and gas province," she said. "Who knows what valuable treasures lie beneath these areas that we know so little about?"

The Government's plan to fast-track the release of exploration permits covering the Lord Howe Rise is part of the nation's energy security plans.

Australia's crude oil self-sufficiency has declined from nearly 100% in 2000 to just more than 60%.

Without major new discoveries it is forecast to decline to 32% by 2017, creating an annual trade deficit in petroleum products, excluding liquefied natural gas exports, of $28 billion.